THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOHN KING, HOST: Thanks, Wolf and good evening everyone. Tonight Yemen's president is wounded in an opposition attack on the presidential palace and a nation critical to the war on terror teetering on the brink of outright civil war. Plus former senator and presidential candidate John Edwards enters a not guilty plea to charges he broke campaign finance laws to funnel money to support his mistress and love child.

(BEGIN VIDEO CLIP)

JOHN EDWARDS (D), FORMER PRESIDENTIAL CANDIDATE: I will regret for the rest of my life the pain and harm that I have caused to others. But I did not break the law.

(END VIDEO CLIP)

KING: But up first serious new worries about your number one concern, the economy. You don't need me or the government to tell you the job market is weak but new numbers from the government tonight show the recovery is even more fragile than most economists believed sparking talk of a double dip recession and talk that President Obama's path to re-election suddenly seems a lot more (INAUDIBLE).

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: There is nobody here who doesn't know someone who's looking for work and hasn't found something yet. Even though the economy is growing, even though it's created more than two million jobs over the past 15 months, we still face some tough times. We still face some challenges.

(END VIDEO CLIP)

KING: The politics of the economy in just a moment, but first the disappointing numbers and some of the factors driving them. Let's take a closer look. Move over here and take a look. First we'll look at the rate, the unemployment rate just over the last two years.

Now remember, the president had been hoping the rate would go down dramatically. You'll see it as we play it out, February 2010, still up there around 10 percent, hovering just below 10 percent. August, November, February, it started to come down a little bit here, but boom, now hovering right up there up around nine percent, unacceptable to the president of the United States without a doubt. If you look across the country here are the states, the 10 states with the highest unemployment rate.

Some of them just happen to be key targets for the president of course in 2012. Nevada, Michigan among them, Florida of course as well, North Carolina, and the state of Rhode Island all presidential targets all above 10 percent. You see those right there, here is another big question is where are the jobs? That is the question many of you are asking at home. Again, here is over the past two years the number of jobs added by the economy -- in the red, the economy was still losing jobs and recession through the end of '09.

Then you see we start to get up and then down, there's the rocky period right here. This is what had had everyone excited. Job market was starting to improve but then this. Just 54,000 net jobs, 54,000 net jobs added right there. That is where you have a problem right there. Now these numbers come on the heels of other recent economic data -- retail sales, some housing data that have people in a sluggish -- thinking there's perhaps a double dip recession, so perhaps no surprise Wall Street closing down yet again this week.

Alison Kosik is live for us in New York and Alison, how much weaker -- how much weaker is the economy, specifically the jobs sector right now than most of the people you thought would anticipate?

ALISON KOSIK, CNN CORRESPONDENT: This is definitely a huge shock to Wall Street today. This number really was a massive miss, John. You know the expectation was that we should have added 150 to 170,000 jobs. You know 54,000 jobs added to the economy, it really doesn't even keep up with population growth. And then you see how much it dropped from the previous month where we had 232,000 jobs added.

And then of course you add it to the other alarm bells that have been going off for weeks about the problems in the economy, manufacturing growth is slowing, consumer confidence is down. Housing prices are down to levels that we haven't seen since 2002. And then of course the icing on the cake is this jobs number. It really put Wall Street in a funk. Wall Street did not take this well today -- John.

KING: So Alison, how serious is the talk of a possible double dip recession?

KOSIK: Well you know it's interesting because the big worry is that it is talk now. I talked with some traders today and they say no longer are we just hearing whispers of a double dip. People are actually talking about it. You know the big worry is if we had millions of people out of work and looking for jobs that aren't there, what is really going to grow this economy? What does this mean for businesses? What does it mean for revenue? This is really the big issue here that is worrying Wall Street -- John.

KING: Alison Kosik live for us in New York tonight, Alison thank you. Let's dig deeper now into what is causing the recovery to stall and whether the government can or should do more to help. Chrystia Freeland is the global editor-at-large (INAUDIBLE) News Agency. Peter Morici is an economist and professor of international business at the University of Maryland. Chrystia, to you first, when you look at these numbers, one of the prime questions I have is Washington having the wrong conversation? The conversation in Washington is dominated by deficits and debt and there are liberal economists who say sure those are important issues, but right now the urgent focus should be on jobs and I know it's a dirty word politically, but stimulus.

CHRYSTIA FREELAND, FORMER U.S. MANAGING EDITOR, FINANCIAL TIMES: I think, John, you are exactly right. When you look at those job numbers and then you look at what is happening in Washington, it's really an "Allison in Wonderland" situation. This is an incredibly serious employment situation. Unemployment at more than nine percent, anemic job creation, and what is Washington obsessed about -- cutting government spending.

One of the things driving those unemployment numbers up is that the government is firing people and the government is not firing, you know non-essential workers. The government is firing school teachers. So yes, I think that there is a real absurdity and a real disconnect between the conversation in Washington and what's happening in the country. You said John that this could be a real problem for the president next year.

I think you're right but I think that this could be a problem for the Republican Party as well because the Republicans have really been pushing the debt and the deficit as the core economic concerns. I think they might find that what Americans really care about is whether they have a job or not.

KING: And, Professor, before we get too deep into politics let's focus on the people. Let's focus on the people. I want to take this off right here. I just want to take a look here at total unemployment because yes, this is a political conversation in Washington but if you're an unemployed American or an under-employed American you really don't care about the politics. You care about trying to find a job.

We have about 14 million Americans who are unemployed. More than six million of them have been unemployed for 27 weeks or more. That's a problem there. Then if you bring these people into the equation as well, you tap in here and you get more. Another 8.3 million Americans are working part-time. They are just under 40 hours a week maybe, but they want to work more. But they're considered under-employed, so 22 million Americans either unemployed or under-employed, Professor, and that number is actually even higher because these surveys don't count people who have just given up, who have just given up. Is there any short-term hope for these people?

PETER MORICI, UNIVERSITY OF MARYLAND: Well the only short-term hope that we really can have is if we do something about the very large trade deficit that we have. One of the reasons we need this huge budget deficit and all this government spending to keep the economy going is that we send so many dollars abroad to buy Chinese goods and to buy expensive, imported oil that don't return to buy U.S. exports. America is suffering from a shortage of demand for what Americans make. You know Ben Bernanke put his finger on it when he said China's currency policy and so forth is slowing the recovery in the United States. Secretary Geithner has been trying to work with the Chinese to get them to revalue their currency. We may have gotten to the point where as the president said last October when he met with Hu Jintao, you know, there are things we can do if you don't act.

The president may have to come to the conclusion that it's time to act unilaterally to correct a trade deficit with China and also the president may have to accept that we're going to have to drill for more domestic oil simply to create jobs in the energy sector and ultimately even if gasoline is expensive to have that money spent here rather than go to the Middle East.

KING: I want to look even closer at the numbers as we -- hang with me one second -- I want to just show something else here. Chrystia mentioned a bit earlier about the sector changes. I want to bring up this here -- business services, that's gaining a little bit. That's a good sign. Health care is adding jobs. This is a sad one here because last month we were talking about that "Made in America" might be making a rebound. Manufacturing jobs have been coming up.

Now they're going down. And Chrystia noted this point here, local governments which have no money continue to hemorrhage and lay people off. Professor, let me start with you first. When you look at the different sectors of the economy, what is the most troubling to you right now in terms of is it manufacturing that we thought might be making a rebound or what else?

MORICI: It's manufacturing because that is where we have to get the growth. We can't expect housing to lead us out. We simply have millions of homes that are yet to be sold, foreclosures and so forth, that we built during the boom that we didn't need at that time and we have to work off that inventory. So manufacturing is where we need to see the growth. Local governments will follow that up and down depending on whether the tax revenues are there. So if we don't get it in manufacturing we just aren't going (ph) home again.

KING: But Chrystia, help me out because if you look at this, we just showed the rate is up again, the rate has been staying here for sometime. Another problem for these Americans, whether you're unemployed or under-employed even Americans that have a job, look at this, this is wages. This is growth in wages month to month. In May six cents an hour, maybe. As you can see wages dropped a lot. This is the height of the recession. Started to trickle back up and then down here, now they're flat lined again, so not only do you have a jobs problem but for many Americans they have a wage, an income problem.

FREELAND: John, you have hit on what I think is the most important and least discussed factor in what is going on in the job situation, which is that it's not just a question of do people have jobs, it's what kind of jobs. And the American economy right now is going through a really profound, structural shift. The economists talk about it as the hollowing out of the middle class. You know the kind of jobs where you are seeing a comeback is in lower paying service jobs and you know those are not going to replace the higher wage manufacturing jobs you know that used to be able to maintain a family.

So I think that that is a real issue for the economy. The one place where we are seeing real growth even believe it or not a bubble is the technology sector. And in high end tech jobs there is actually a shortage of workers. So you are seeing a real polarization of the American work force.

KING: So, Professor, if we're at 9.1 percent unemployment right now and I'll bring that number back up so people can see it although it's a bit depressing when you show it, where are we going to be a year from now?

MORICI: Oh I think that if the economy continues to grow at this anemic rate it'll stay above eight percent. If we go into a second dip, which is a real, real you know issue because it's very hard to grow at only two percent without cycling down, then we'll be at 12 or 13. We're not going to stay at 9.1. We're either going to go down to about eight or we're going to go up into double digits again.

KING: Chrystia, when you hear the professor and you just heard Alison talk about the conversation about a double dip. Do people really believe that? Is it a fear or is it a reality?

FREELAND: I think it's becoming a reality. And I think Professor Morici is absolutely right that it is hard to keep on treading water I guess is the right metaphor.

UNIDENTIFIED MALE: Yes. Right.

FREELAND: Either you start swimming or you sink. And I think this summer could turn out to be a real turning point.

KING: Chrystia Freeland and Professor Morici, thanks for coming in tonight. It's a tough story to talk about but an important story. We'll stay on top of it.

And still ahead here the politics of the economy, rising unemployment means rising anxiety to the Obama re-election campaign, but do Republicans have a better jobs program? And next, marchers chanting "freedom" are gunned down by a Syrian regime whose ruthlessness appears to know no bounds.

(COMMERCIAL BREAK)

KING: In Syria today dozens of people were killed when pro- regime forces opened fire on anti-government marchers in the western city of Hama. One witness to this latest bloodshed tells CNN the demonstrators were chanting "freedom, freedom" and calling for an end to the regime of Bashar al-Assad.

CNN has been denied permission to send our own correspondents and crews to Syria during what is now a three-month uprising but our Arwa Damon is working her sources inside Syria from neighboring Lebanon with us now from Beirut. Arwa, what more do we know about this latest bloody clash?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: The deadliest day to date since this uprising began according to activists and eyewitnesses, the greatest amount of bloodshed taking place in the city of Hama that you mentioned there were according to eyewitnesses and activists. Tens of thousands of demonstrators took to the streets in different neighborhoods. They were trying to converge on a central square when they say Syrian security forces indiscriminately opened fire on them.

But it has been incredibly difficult, even more difficult than it is in the past for us to even begin to ascertain what is happening inside Syria because according to activists the regime shut down the Internet in many parts of the country. Activists believing that this is because the regime is trying to prevent the truth from getting out. And that is why we have actually seen a significant decrease in the number of YouTube videos emerging but activists telling us the demonstrations pretty much taking place throughout the entire country, in many cases again being met with lethal force, in other cases being met with tear gas. But most certainly Hama appearing to have been the deadliest city to be in on this day -- John.

KING: And you have this situation, Arwa, where in the public statements whether it's the granting of amnesty or saying he is willing to talk to his opponents, the regime trying to appear open to dialogue, if you will, while closing down the country and from everything we can do in our own reporting essentially indiscriminately killing his own people.

DAMON: That is right. John that is most certainly the perception that is created. And analysts will tell you that this talk of reforms or these so-called reforms that are being put into place by the Assad regime are not necessarily an attempt to appease the opposition or an attempt to better the image in the international spotlight. They're more of an attempt to try to hold on to the regime loyalists that they can then turn around and say, look. This is a president who is actually trying to reform the country.

But at the same time, we continue to see no matter what reforms are being talked about the same methodology being employed time and time again when it comes to these demonstrations. We see demonstrators who appear to be unarmed who appear to be chanting "freedom", chanting "peaceful", chanting that they want the downfall of the regime, that they want the martyrs blood not to be shed in vain, but at the end of the day not calling for violence, being met with according to activists indiscriminate force. And that has been the trend since this uprising began.

KING: Arwa Damon for us in Beirut. Arwa thank you.

Also disturbing news tonight from another Mideast trouble spot, Yemen. Yemen of course on the southwest tip of the Arabian Peninsula close tonight to all out civil war. Demonstrators and forces loyal to the country's president clashed in several cities throughout the week. Today the violence reached Yemen's capital. Yemen's president was heard in audiotape on state television tonight just hours after surviving a deadly attack on his presidential palace. CNN's Mohammed Jamjoom monitoring developments in Yemen from Abu Dhabi -- Mohammed, let's start with this basic question. What do we know about the condition of the president after this attack?

MOHAMMED JAMJOOM, CNN CORRESPONDENT: Well, Jonathan, throughout the day Yemeni government officials insists that President Saleh had only sustained a slight wound on his head, that he was fine, and that he would be delivering an address to the country at some point during the day. We waited hours and hours for that address.

Finally there was an audiotape that appeared on Yemeni state television in the evening in which President Saleh thanked all the sons and daughters of Yemen and the security forces for their well wishes. He also thanked the security forces for going after who he called gangsters who perpetrated this attack. But the reason this audiotape was greeted with more worry than happiness is because it made people wonder if President Saleh actually sustained more injuries than the government would like people to believe.

You know Saleh has a very big media apparatus at his beck and call. He can go on television at any time. The fact that it was so delayed and the fact that you saw no video of him and the fact that he sounded woozy and tired when he was giving these remarks and that they were so short really made people wonder if he was more hurt than people would like you to believe and it's really increasing fears amongst government officials I'm speaking with in Yemen as to how vulnerable President Saleh, how vulnerable his forces are.

You know the presidential palace in Sanaa is a fortress. It is so heavily fortified, so guarded. The fact that tribesmen were able to get this close, were able to breach it, were able to shell it a very worrying development in a country where there are so many fears that it is on the verge of civil war -- John.

KING: You mentioned those fears, Mohammed. Most Americans as we watched the dramatic developments throughout the region you tend to say you're rooting for the pro democracy demonstrators. In the case of Yemen, al Qaeda and the Arabian Peninsula headquartered there. It has tried to engineer dramatic attacks against the United States. What are the calculations about how this civil strife is affecting for better or worse the strength of al Qaeda in the Arabian Peninsula?

JAMJOOM: John, there is so much concern about al Qaeda in the Arabian Peninsula right now. That is really the number one fear for the west and for the regional allies of Yemen including Saudi Arabia, which is just to the north of Yemen. To give you some perspective on this, I was there in Yemen in February. I spoke to the prime minister at that time.

He is one of the parties that was injured in today's attack at the mosque at the presidential palace. I asked him point blank when I was there will al Qaeda in the Arabian Peninsula try to take advantage of political turmoil there? He said he thought that they would. In the past week alone we've heard of a city in a hot bed for militancy in that country, a city called Zanzibar (ph), which was overtaken, which was seized by Islamic militants.

Just in this past week they've been battling it out with security forces in that city for control of that city. The fact that that has happened at this time is really stoking concerns that al Qaeda is going to make a move on other cities there and really try to take advantage of all the turmoil in that country -- John.

Up next here a new government report warns billions of your dollars, your dollars may end up going to waste. Find out why and where after the break.

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KING: Welcome back. Here is the latest news you need to know right now. The House today passed a resolution criticizing President Obama for not consulting with Congress before ordering U.S. forces into action over Libya. But lawmakers rejected a resolution demanding a U.S. pullout from NATO's ongoing military operation.

A report out tonight warns billions of taxpayer dollars may be wasted in Iraq and Afghanistan if their governments neglect projects like health clinics, police training facilities, and even roads. Those projects all started by the United States.

The assisted suicide advocate Dr. Jack Kevorkian died today of natural causes. He was 83.

The government has wrapped up two weeks of online bidding for items that once belonged to the Unabomber Ted Kaczynski taking in about a quarter of a million dollars that will now be used to compensate some of his victims.

And a five-month probe found no evidence that an organized work slowdown by sanitation workers was responsible for New York City's poor response to last December's big blizzard. However, the report did find at least one instance of workers buying beer instead of doing their jobs.

President Obama has broken a lot of barriers. Up next, something no recent president has done before, it has to do with your job and his.

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KING: The government's tough new jobs report today cast a cloud over what was designed as a bit of a victory lap for President Obama. Here you can see the president. He's at a Chrysler assembly line in Toledo, Ohio. He was there in a Bellwether presidential politics state to make the case the government's decision to bail out General Motors and Chrysler is paying huge dividends.

(BEGIN VIDEO CLIP) OBAMA: If we let Chrysler and GM fail, plants like this would have shut down, then dealers and suppliers across the country would have shriveled up. Then Ford and other automakers could have failed too because they wouldn't have had the suppliers that they needed. By the time the dominos stopped falling more than a million jobs in countless communities and a proud industry that helped build America's middle class for generations wouldn't have been around anymore.

(END VIDEO CLIP)

KING: Let's take a closer look. Many of you might remember the auto bailouts were quite controversial at the time. First let's just look at auto growth, jobs growth in the auto sector -- all this red the industry back to 2007 just bleeding jobs, bleeding jobs. Here, the recession, boom.

You see right around here, this is late in the Bush administration, George W. Bush administration. That's the initial government loan, continued to lose jobs. Then you start to see with one quarter here down, there has been job growth, since the third quarter of 2009 job growth in the auto industry. Now how much money was spent into this?

That's one of the big political controversies here. General Motors got about just shy of $50 billion. Their financing arm got some money. Chrysler got about 12.5 billion. Its financial arm got some money there. You see 24 billion has been paid back by Chrysler, about almost $11 billion by Chrysler -- I'm sorry -- by GM has paid back about 24 billion, Chrysler almost $11 billion there.

Here's what the government looks at now if they look at how this has worked. You're going to get all of your money back. About $81 billion went out. The projections right now is that the government will lose, at most, about $14 billion of that money might not come back. This is still a work in progress, of course, but that is the current projection right there.

Now, most Republicans opposed the auto industry bailout, including the man who is the nominal front runner for the Republican presidential nomination, the former Massachusetts governor, Mitt Romney. You can kiss the American automotive industry good-bye was Governor Romney's 2008 prediction of what would happen if the bail out was approved.

Well, CNN's Poppy Harlow sat down with Chrysler's CEO today to get his take.

And, Poppy, yes or no? Bail out save Chrysler or indifferent?

POPPY HARLOW, CNNMONEY.COM: No question about it. I was rereading that 2008 op-ed from Mitt Romney when he said, look, don't just hand a check to Chrysler and G.M. He actually said, ostensibly, let Detroit fail. This is not the way to fix the American automotive industry. Remember Mitt Romney's father helmed one of Detroit's auto firms a few decades ago. And I asked the CEO of Chrysler, Sergio Marchionne, point blank, do you think that if the government did not step in in such a massive way to rescue G.M. and Chrysler, that Chrysler could stand on its own two feet? Could it have stood alone and made it through this alone?

I want to play his answer and his reaction to what Mitt Romney had to say for you now. Take a listen.

(BEGIN VIDEO CLIP)

SERGIO MARCHIONNE, CEO, CHRYSLER GROUP: Whoever tells you that is smoking illegal material. That market had become absolutely dysfunctional. It had become absolutely dysfunctional in 2008-2009.

I -- there were attempts made by a variety of people to find a strategic alliances with other carmakers on a global scale. And the government stepped in as the actor of last resort. It had to do it because the consequences would have been just too large to deal with.

(END VIDEO CLIP)

HARLOW: Sergio Marchionne, John, there not mincing words at all. The president today at that Chrysler plant in Ohio -- of course, a key campaign state for him, said American manufacturing, American industry is back. He called the resurgence of Chrysler improbable -- John.

KING: And, Poppy, Governor Romney's argument at the time back in 2008 was if you give the industry money, it's never going to change its behavior. And he wrote this in that op-ed, we talk about, "With it the automakers will stay the course, the suicidal course of declining market share."

What's the verdict on that?

HARLOW: It's simply not the case. I mean, this isn't a disputable issue. This is a fact.

When you look at the numbers for Chrysler, General Motors, and Ford -- Ford didn't get government money. Look at all three. Their sales are not only up substantially in the U.S., John, they're up globally. China is now the biggest market for G.M., bigger than the U.S. is.

And when you look at Chrysler specifically where President Obama was today, Chrysler sales when you look at May, last month, are up 27 percent from where they were a year ago.

Now, look, these companies owe the U.S. money, but the bottom line is their sales are up from where they were and they would not have stood were it not for the bail out, and the White House projects they say conservatively 1 million American jobs would have been lost if they weren't to come to the rescue of the automakers.

KING: And so, there's the big political debate, is this the government's job? Should the government ever intervene? Or should the government just let them crash? Obviously, the government did intervene. And the question now is what Chrysler, that $1.3 billion still in the red to the government. General Motors is about $10 billion still to be paid back I think.

So, the question is: overall worth it -- was it a worth while investment propping up the industry? You say a million jobs, the White House says. I'm sure there is someone who is going to dispute that. But bottom line: is it worth it?

HARLOW: It's a great question. It's one we're going to hear time and time again at the debates, including the, you know, Republican debate coming up.

The bottom line is, when you look at the investments that these companies have made in the U.S., they're substantial. General Motors, Ford, Chrysler are pouring billions of dollars into their factories here. Chrysler, a good example.

Kokomo, Indiana, John, you know that that town. That relies solely on the auto industry. Chrysler has just poured a lot of money in there. That means a lot of auto jobs. We have to be fair here. Although Chrysler did repay its loans to the U.S. government six years in advance, Obama making a big headline on that today.

At the same time, they still do owe taxpayers $1.3 billion. We're not going to get that back. G.M. more than $10 billion is owed to taxpayers.

And what we're likely going to see I think is the treasury pretty soon is expected to sell its shares in General Motors. It doesn't want to be part of a private company and we could likely lose billions to General Motors.

So, was it the ideal scenario? No. But at the same time, you look at the American jobs and you look at a city like Detroit, John, they still have what Secretary Geithner called unacceptably high unemployment in Detroit. But unemployment in Detroit is down one- third from where it was two years ago. And I can tell you, spending a lot of time there, there's no way that would have happened without a bailout of the auto industry.

But it's going to be very interesting as President Obama touts this accomplishment as he calls it for his team, heading into obviously the election cycle. It's going to be interesting to hear Republicans say, look, Ford didn't take a bailout and look how well they're doing now -- John.

KING: One of the debating points on the economy sure to carry over through the presidential campaign. Poppy Harlow, thanks so much.

So, perhaps the president can sell the auto industry bailout as a success story, but he still have to defy history to win re-election. Not once in the modern era has a president won a second term with an unemployment rate above 7.2 percent? And you will not find an economist who thinks it will drop even close to that number by the time President Obama asks for your vote next year. So, is he doomed to just one term? Let's ask two people who understand the politics of the economy as well as anyone. The former two-term Michigan Governor Jennifer Granholm and veteran "TIME" political columnist Joe Klein.

Governor, to you first. And I want you to listen to the president right out of the box here, because he has a tough job. The unemployment rate ticked up again today. The recovery is very fragile. And the president is essentially trying to tell the American people, well, it would be worse if not for me. Listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There are still some headwinds coming at us. Lately, it's been high gas prices. It caused a lot of hardship for a lot of working families. Then you have the economic disruptions following the tragedy in Japan. You got the instability in the Middle East, which makes folks uncertain. There are always going to be bumps on the road to recovery.

(END VIDEO CLIP)

KING: You can't argue, Governor, with anything the president just said there. However, can you win an election in a tough economy by essentially saying, well, then this happened, then this happened, then that happened? It is not a terribly optimistic, upbeat message.

JENNIFER GRANHOLM (D), FORMER MICHIGAN GOVERNOR: Well, all I can say is, look what happened in Michigan in 2006. I was running for a second term. We had the highest unemployment rate in the nation. And it's all about a choice.

And the voters want to know, do you have a plan? Do you -- are you like me and do you have a plan? And, obviously, he is going to be up against somebody, let's just say, for example, it might be Mitt Romney. Well, Mitt Romney ran Massachusetts and it had the third worst unemployment rate or third worst job growth rate in the country.

So, you know, it's all going to be about a choice. I think that people want to know, do you have a plan? How are we going to get out of this? And I think that's really going to be the key part -- how do we create jobs in America.

KING: Well, Joe, the governor mentioned Mitt Romney. So, I'll read a little bit of what he said today. He is the son of Michigan, where Governor Granholm is from. He's now, of course, the former governor of Massachusetts.

He said this about the jobs report: "Today unemployment numbers show we are going backwards and that is the wrong direction for America. President Obama's policies made the recession worse and as a result more people are out of work."

I want to get to some history in a minute, Joe, but do you hear as yet from any of the Republicans, not just Governor Romney, a compelling new narrative about the economy or is it essentially just the old left-right pick?

JOE KLEIN, POLITICAL COLUMNIST, TIME MAGAZINE: Well, I think what you see from Mitt Romney, and I just came back from there, is a compelling new focus on the economy to the exclusion of social issues and foreign policies and a whole bunch of other things. He understands that if a Republican is going to be elected in 2012, it's going to be on the basis of the economy because as we just saw, the argument that Obama is trying to make -- things could have been worse -- is the toughest of all possible arguments to make in politics.

KING: Governor, you mentioned your reelection -- you mentioned your reelection in 2006. I want you to look more recently at 2010 and if you look at the polling data showing the president has a problem. If he has a -- his biggest problem with the electorate I would say is with white men, blue collar workers. And you see it in the Republican gains in your state in 2010, in the other industrial states around Michigan, where the president will be campaigning for re-election.

How does the president break through with those blue collar, I'll call them Reagan Democrat types who are -- yes, they might vote Democrat, but they're also not afraid to vote Republican?

GRANHOLM: Right. Well, where was he today? He was in Toledo, Ohio. He has saved this auto industry and I think the more he can tell that story, the better off he is.

But it's not just about the past. He has to be very specific about the future. What is the plan for America to be competitive in a global economy when other countries, especially in areas like, you know, energy, and jobs in that realm are eating us for lunch? We've got to have a uniquely American solution to creating jobs and what the Republicans are offering is laissez faire, hands off.

KING: Joe, how much of this is the numbers, getting the rate to drop, getting people to look at the statistics and say, OK, the economy is going in the right direction. How much of it is mindset?

I ask in the context of a campaign you and I spent a lot of time covering back in 1992, we were both in our teens -- when George H.W. Bush rightly so made the case things are getting better. Unemployment got up near 8 percent then started coming down closer to the election. And he kept saying it's getting better, it's getting better, it's getting better, and guess what? The voters had just decided, no, it's not.

The right track/wrong track in this country was at 76 percent wrong track in October, 1992. And even though the numbers were on President Bush's side back then, he could not break through. Could President Obama have the same problem?

KLEIN: Well, yes. He could have the same problem. Bush had another problem which was that he was running against a genius campaigner of my political lifetime. I mean, Bill Clinton really knew how to make a case.

Barack Obama, on the other hand, has gotten himself into -- trapped into issues that the American people don't care all that much about. He spent the first year of his presidency on health care reform when people were concerned about the economy and jobs.

Now, since he lost in the 2010 election, he's been focusing on deficit reduction, long-term deficit reduction, which like health care reform is a problem that we have to deal with but it's not what the people care about.

They care about what the governor just said. They care about jobs -- which is why I think that the auto bailouts is one of the strongest stories he has out there to tell. It's made a difference in the Midwest. I saw it when I drove through that area last September. And it made a difference in the way people perceived him.

I think that he has to do the same for the rest of the country. But it's really hard for him to do that right now because where is the money going to come from?

KING: And, Governor, give us your thoughts.

GRANHOLM: Yes, I mean, I'd say -- I'd say a couple things. Providing low or no interest loans to manufacturers and technology so that they can take root here and not just watch them be poached by these other nations. Putting on the table a commitment as a nation to having 80 percent of our energy come from clean sources by 2035, like he's done -- but really go out and fight for it and tell people that will create a market here.

Now, this is something that the -- that the president hasn't talked about at all. When you go out into the middle of the country -- the governor can, you know, confirm this -- you ask people what is the president's position on China, which is an issue that concerns them tremendously, they don't know what it is, for good reason.

GRANHOLM: Yes, no doubt about it. I mean, he needs to be fighting like a tiger for jobs in this country. He needs to play both offense and defense on behalf of our economy.

We're not going to lose more jobs and we're going to create our jobs and we're not going to be victimized by the globe but we're going to take advantage of it, which is why going overseas and inviting international companies into America and say come here and create jobs for our citizens and not just see this be a one way street somewhere else is critical.

KING: Jennifer Granholm, Joe Klein -- appreciate your time tonight.

KLEIN: Thanks. GRANHOLM: Appreciate it.

KING: Take care. Thank you.

And you heard the governor right there saying the president needs to fight like a tiger when it comes to making the jobs case. Let's button up the conversation just with a reminder of why the president has such a steep argument. Look at this. This is 9.1 percent unemployment.

If you back over time, this is the last two years, essentially, almost a flat line, a little above 10 percent. This has been the last two years in the United States of America, a little bit of a dip. Now up at 9.1 percent -- very tough challenge for the president heading into a re-election campaign.

And if you look at this number right here, 14 million Americans who don't have jobs, the numbers actually higher. Many Americans have just checked out, not looking for jobs anymore so they're not counted. But about 14 million Americans who don't have a job then you add in 8.3 million who are underemployed, working part-time, not getting the job they want.

More than 22 million Americans essentially unemployed or under employed -- a tough challenge for the president heading into the re- election campaign cycle. We'll continue to track this, your number one concern: jobs and the economy.

Up next here, though, John Edwards speaks out for the first time about his legal troubles.

(BEGIN VIDEO CLIP)

JOHN EDWARDS (D), FORMER PRESIDENTIAL CANDIDATE: I never, ever thought I was breaking the law.

(END VIDEO CLIP)

KING: But a federal grand jury's indictment suggests otherwise. So, how strong is the government's case against the former Democratic candidate for president? That's next.

(COMMERCIAL BREAK)

KING: This afternoon, a federal judge released John Edwards on his own recognizance -- but the one-time senator, vice presidential nominee and presidential candidate is looking at federal charges that could ultimately send him to prison for up to 30 years. Edwards pleaded not guilty to a six-count indictment charging him with conspiracy, making false statements and breaking campaign contribution laws because he accepted more than $900,000 the government says in an attempt to cover up his affair with a campaign worker.

(BEGIN VIDEO CLIP)

EDWARDS: There is no question that I've done wrong and I take full responsibility for having done wrong. And I will regret for the rest of my life the pain and the harm that I have caused. But I did not break the law and I never, ever thought I was breaking the law.

(END VIDEO CLIP)

KING: CNN's Joe Johnson is in North Carolina for today's court hearing. He joins us, along with CNN senior legal analyst Jeffrey Toobin.

Joe, I want to start with you. You know John Edwards. You've covered him over the years. What was the mood, your sense of the man today?

JOE JOHNS, CNN CORRESPONDENT: Well, I have to tell you, John, I walked into the courtroom expecting to see John Edwards. He was there sitting down in front surrounded by his lawyers.

And the first thing I was struck by and has sort of stayed with me is here is a guy who was one of the last men standing -- last people standing in the 2008 run for the Democratic nomination -- remember him from the South Carolina primary debates that probably the last time I got a good look at him.

And, today, he was stand go up again, only this time before a judge with some very serious charges before him and still it looks very much like the same guy, but basically in a whole lot of trouble, or at least in large part because of his own doing, this illicit, if you will, extramarital affair with Rielle Hunter that led to a child. Essentially arguing, hey, my relationship with her is something I wanted to try to keep secret and the government saying that he got hundreds of thousands of dollars from two contributors, philanthropist Bunny Mellon and Fred Baron, a lawyer out of Texas, essentially to try to cover that up.

And this is where we find ourselves today.

So, it's probably going to be a long and complicated legal battle and very interesting, too, and, especially, because North Carolina is a place that's going to be the center of American politics next summer.

KING: Joe, stay with us. Jeff, I want to get to the particulars of the case, but John Edwards is an accomplished attorney before he was a politician. I just want to ask you, did you read any significance into exactly what he said -- before we get particularly to charges -- where he said, "I did not break the law and I never, ever thought that I was breaking the law," why would that intent be important?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Because this crime is what's called the specific-intent crime. It's not just that you broke the law. You intended to break the law.

When you're caught speeding it doesn't matter what your intent is. Speeding is not a specific intent crime. If you say to the cop, well, I didn't intend to go 80, the cop doesn't care because speeding doesn't require any level of intent.

But if you commit the acts that the government accuses you of, in a case like this, what you didn't intend to violate the law, you are acquitted or you're supposed to be under the jury instruction.

So, I think he is laying down the beginning of a defense that says, hey, look, I was dealing with a troubled marriage. I was dealing with a child, but I was not thinking about the campaign finance laws. It didn't even occur to me that I might be breaking the law -- that's what he was saying, I think.

KING: And the government -- the government -- let's stay with this for a second because the government knows that argument's coming and here's part of the indictment, "The purpose of the conspiracy was to protect in advance Edwards' candidacy for president of the United States by secretly obtaining and using hundreds of thousands of dollars in contributions well in excess of the Election Act's limit to conceal Edwards' extramarital affair."

So, what the government is saying is, "Nice try, you were trying to protect your campaign and not just maybe, you know, your own embarrassment and your marriage."

TOOBIN: That's right. And that's why it's very important to wait and see what the evidence is. And here's one of the complications for the government in this case. The money came from two people, Bunny Mellon and Fred Baron. Fred Baron died over a year ago. So, he's not going to be a witness. Bunny Mellon is not 99 years old, she is 100 years old, and it is far from clear that she is going to be able to testify at the trial.

So, how was the government going to prove this? They're going to prove it largely through the testimony of Andrew Young, who was the one-time aide who turned on Edwards and then wrote a book about it. He is going to be a witness who can be quite extensively cross- examined.

So, I mean, the government is going have some real challenges here in proving its case.

It's got a lot of advantages, but this is not a slam dunk case.

KING: And on that point, Joe Johns, you know, we both reported this, there were plea negotiations before hand and I'm told, I believe you were reporting, Edwards: (a), did not want to plea to a felony because he would have to give up his law license. He also doesn't want to go to jail.

Do you see any possible negotiations between now and trial date or has Senator Edwards and his team simply decided -- you just heard Jeff talked about the witnesses -- that they can go into court and win this case?

JOHNS: Well, you know, that's anybody's guess, but it certainly looks like they laid down a marker today. And, look, the other thing that people don't talk a lot about, but is very true, he was a very successful trial lawyer here in the state of North Carolina. He understands juries. He understands what you have to do to win.

So, he's also got some very good attorneys working with him -- Greg Craig who worked on the impeachment of President Clinton and others. So, it's pretty clear that they're prepared to go to the mat.

Now, whether there could be a negotiation somewhere down the line, that's anybody's guess. The fact of the matter is, you know, both sides are -- I don't want to use the term locked and loaded, but both sides are pretty read to go to battle here.

KING: It seems to be headed that way. And I have to say is I thank Joe Johns and Jeff Toobin.

It is just bizarre to see. This is the arrest warrant. This is the arrest.

Now, the senator came to court on his own. This is a formality. They prepared the warrant. He came to court on his own. He's cooperated. But it's just odd to see an arrest warrant for the man who was the Democratic vice presidential nominee not that long ago and a serious candidate for president.

TOOBIN: John --

KING: Yes, Jeff?

TOOBIN: John, if I could just -- read his name on the arrest warrant. I didn't know that was his name.

You saw -- you saw Kate Edwards over her father's shoulder there. There are two younger children involved as well. So, this is not just a tragic event. It's tragic for the Edwards family. Those kids recently lost their mother.

When we come back, a candidate for president who speaks Chinese and Mitt Romney announced a run for president in New Hampshire yesterday. So, he'd be on the front-page of the local newspaper today, right?

(COMMERCIAL BREAK)

KING: A number of Republican candidates for president appearing at what's called at Faith and Freedom Conference here in Washington. None -- none will do what one did today. Here's Jon Huntsman, the former governor of Utah.

(BEGIN VIDEO CLIP)

JON HUNTSMAN (R), FORMER UTAH GOVERNOR: (SPEAKING CHINESE). Oh, I forgot, did he say only in English? Something like that.

(END VIDEO CLIP)

KING: Good humor. Governor Huntsman was the former ambassador under a Democratic president, this Democratic president, to China. A little humor there.

Now, I want to take you back in time just before the midterm elections in 2010. John Boehner, the Republican speaker-to-be, but not then yet -- our senior congressional correspondent asked him about his relationship with the president of the United States and had an idea. Let's listen.

(BEGIN VIDEO CLIP)

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: It is not a state secret that you and the president don't exactly have a warm and fuzzy relationship. If you were to achieve your goal and if you were to become the next speaker of the House, how would you -- how would you work with him? Maybe a golf summit or something like that?

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Listen, I like the president. We get along personally. We disagree. But yes, we're not especially close. But I suspect, in the coming months, we'll have an opportunity to get a lot closer.

(END VIDEO CLIP)

KING: Maybe in the coming days. We'll show you some pictures. Both of these guys like golf. We've had beer summits and we're going to have that golf summit. The president of the United States and the speaker will go golfing on June 18th. A lot to negotiate there.

One final light note before we go. I want to show you some pictures. Sarah Palin ended her bus tour, this leg of it anyway, in New Hampshire this morning, sitting down for breakfast with the Republican senator, newly elected, fellow mama grizzly, Palin says, Kelly Ayotte. That's in New Hampshire this morning.

One thing they might have been discussing, how about this front page. Mitt Romney announced his candidacy for president in New Hampshire yesterday. There's a little reference to it right here. Palin hits the sea coast dominating the front page -- just the way she wanted it.